Pricing is the hardest part of freelancing. Charge too little and you burn out working constantly without earning enough. Charge too much and you lose clients. The sweet spot exists — and there's a formula to find it.
The Cost-Based Method: Your Floor Rate
Start with the minimum you need to earn. This is your floor — never go below this number.
Step-by-Step Calculation
1. Target annual income: $75,000 (what you want to take home)
2. Add self-employment tax (15.3%): +$11,475
3. Add income tax (~22%): +$16,500
4. Add benefits (health insurance, retirement): +$12,000
5. Add business expenses (software, equipment, etc.): +$5,000
Total needed: $119,975/year
6. Billable hours (50 weeks × 30 billable hours): 1,500 hours
Minimum hourly rate: $119,975 ÷ 1,500 = $80/hour
Notice the "30 billable hours" — not 40. As a freelancer, you'll spend 10-15 hours per week on non-billable work: marketing, admin, invoicing, client communication, and business development. If you price based on 40 hours, you'll consistently fall short.
Why Freelancers Must Charge More Than Employees
If you made $75,000 as an employee, your freelance rate needs to be significantly higher. Here's why:
No employer-paid benefits. Health insurance, 401(k) matching, paid time off, disability insurance — these add 25-40% to the value of an employee salary. Your employer was paying $93,000-$105,000 for you to take home $75,000.
Self-employment tax. You pay both the employer and employee portions of Social Security and Medicare — an extra 7.65% on top of what employees pay.
Unpaid time. Employees get paid for holidays, sick days, and vacation. Freelancers don't earn when they don't work. Factor in 2-4 weeks of unpaid time per year.
Business overhead. Software subscriptions, accounting fees, equipment, a home office, internet, continuing education — these come out of your pocket.
💡 Quick Rule of Thumb
Take your desired salary, divide by 1,000. That's a reasonable starting hourly rate. Want to earn $80,000? Start at $80/hour. Want $120,000? Start at $120/hour. This isn't exact, but it accounts for taxes, benefits, and non-billable time.
Hourly vs. Project-Based Pricing
Hourly pricing is simple and transparent. It works well for ongoing work, unclear scope, and consulting. The downside: it penalizes efficiency. The faster and better you get, the less you earn.
Project-based pricing is better for experienced freelancers. You quote a fixed price for a defined deliverable. If you finish faster because you're skilled, you keep the upside. It also aligns your incentives with the client — they care about the result, not hours worked.
Value-based pricing is the most advanced approach. You price based on the value you deliver, not the time it takes. A website that generates $50,000/year in new business is worth $5,000-$10,000, regardless of whether it takes you 20 or 40 hours to build.
Industry Rate Benchmarks (2026)
Web Development: $75-$200/hour
Graphic Design: $50-$150/hour
Copywriting/Content: $50-$150/hour
Marketing/SEO: $75-$200/hour
Video Editing: $50-$125/hour
Consulting (business/strategy): $100-$300/hour
Bookkeeping/Accounting: $40-$100/hour
Virtual Assistant: $25-$60/hour
Rates vary by experience level, location, and niche specialization.
How to Raise Your Rates
Grandfather existing clients. When raising rates, give current clients 30-60 days notice and consider a smaller increase than what you charge new clients. New clients pay the new rate from day one.
Specialize. Generalist freelancers compete on price. Specialists compete on expertise. A "React developer for fintech startups" commands higher rates than a "web developer."
Build a portfolio of results. Case studies that show ROI (not just pretty work) justify premium pricing. Clients pay more when they see proof of value.
Raise rates gradually. Increase by 10-20% for new clients every 6-12 months. If you're never losing prospects on price, you're probably too cheap.
Calculate Your Ideal Rate
Freelance Rate Calculator
Calculate your ideal hourly rate based on income goals, expenses, and billable hours.
More Useful Tools
Profit Margin
Track your freelance business profitability.
Calculate →Paycheck Calculator
See your take-home after self-employment taxes.
Calculate →Retirement Calculator
Plan retirement savings as a freelancer.
Plan Now →The Bottom Line
Your rate should cover all costs (not just your salary), reflect your skill level, and leave room for growth. Start with the cost-based floor, then work toward value-based pricing as you build experience and reputation. Most freelancers undercharge — the discomfort of raising rates is temporary, but the financial impact is permanent.